(IND) Setting Up the System for VAT

This chapter discusses how to:

Assign VAT category codes to item numbers.
Set up general ledger accounts for VAT and CST transactions
Set up retention percentage and deferred period for state level constants.
Enter opening stock adjustment amount for VAT credit.

Assigning VAT Category Codes to Item Numbers

This section provides an overview of value-added tax (VAT) category codes assignment and discusses how to assign a VAT category code to an item number.

Understanding the VAT Category Codes Assignment

You use a VAT category code to indicate whether an item is eligible for VAT. Assign the category code after you assign the item numbers to the business units in the Item category Relationship program (P75I2140).

Forms Used to Assign Item Category Relationships

Form Name	FormID	Navigation	Usage
Work With Item Category Relationship	W75I2140A	System Setup (G75I2230), Item category Relationship	Review item details by item number or business unit.
Item Category Relationship Revision	W75I2140C	Select a record on the Work With Item Category Relationship form and click Select.	Assign a VAT category code to an item number.

Assigning a VAT Category Code to an Item Number

Access the Item Category Relationship Revision form.

VAT Cat Code (value-added tax category code)

Enter a user-defined code from UDC table 75I/VT to specify if the item is eligible for VAT. Examples are:

C: capital item

E: eligible item

Setting Up General Ledger Accounts for VAT and CST Transactions

This section provides an overview of company and business unit setup in the account master and discusses how to set up the payable and receivable VAT and CST (central sales tax) accounts.

Understanding Company and Business Units Setup in the Account Master

Use the VAT / CST Account master Setup program (P75I2141) to set up the general ledger accounts that the system uses for payable and receivable transactions for VAT and CST. You must set up these accounts for each company that processes VAT or CST transactions.

The system uses the accounts and company associations for VAT and CST reporting.

Forms Used to Set Up General Ledger Accounts for VAT and CST Transactions

Form Name	FormID	Navigation	Usage
Work with VAT/CST Account Master	W75I2141A	System Setup (G75I2230), VAT / CST Account master Setup	Review the account setup defined for a company.
VAT/CST Account Master Revision	W75I2141B	Click Add on the Work with VAT/CST Account Master form.	Set up the payable and receivable account for VAT and CST.

Setting Up the Payable and Receivable VAT and CST Account

Access the VAT/CST Account Master Revision form.

VAT

Receivables Business Unit	Enter the business unit of the VAT receivables account. The system uses this account for VAT receivable transactions. You must set it up for each company that processes VAT transactions.
Receivables Object Account	Enter the object account of the VAT receivables account. The system uses this account for VAT receivable transactions. You must set it up for each company that processes VAT transactions.
Receivables Subsidiary	Enter the subsidiary account number of the VAT receivables account. The subsidiary account number is the subset of the object account. Subsidiary accounts include detailed records of the accounting activity for an object account.
Payables Business Unit	Enter the business unit of the VAT payables account. The system uses this account for VAT payable transactions. You must set it up for each company that processes VAT transactions.
Payables Object Account	Enter the object account number of the VAT payables account. The system uses this account for VAT payable transactions. You must set it up for each company that processes VAT transactions.
Payables Subsidiary	Enter a parent subsidiary account number that corresponds to VAT payables.

CST

Receivables Business Unit	Enter the business unit of the CST receivables account. The system uses this account for CST receivable transactions. You must set it up for each company that processes CST transactions.
Receivables Object Account	Enter the object account of the CST receivables account. The system uses this account for CST receivable transactions. You must set it up for each company that processes CST transactions.
Receivables Subsidiary	Enter the subsidiary account number of the CST receivables account. The subsidiary account number is the subset of the object account. Subsidiary accounts include detailed records of the accounting activity for an object account.
Payables Business Unit	Enter the business unit of the CST payables account. The system uses this account for CST payable transactions. You must set it up for each company that processes CST transactions.
Payables Object Account	Enter the object account number of the CST payables account. The system uses this account for CST payable transactions. You must set it up for each company that processes CST transactions.
Payables Subsidiary	Enter a parent subsidiary account number that corresponds to CST payables.

Setting Up Retention Percentage and Deferred Periods for State-Level Constants

This section provides an overview of the state level constants setup and discusses how to set up the retention percentage and deferred period.

Understanding the State–Level Constants Setup

The way you account for VAT during the purchase of capital goods and the stock transfers varies in each state of India. For example, some states are eligible to claim the tax paid during the purchase of capital goods over a period of 36 months, whereas others can claim it over a period of 24 months. During the stock transfers, the state retains a percentage of the input tax. The percentage varies for each state.

Use the Retention Percentage program (P75I220) to set the state level constants.

Enter the deferred period for the capital goods and the retention percentage for the stock transfers in the Retention Percentage program.

Forms Used to Set Up State Level Constants

Form Name	FormID	Navigation	Usage
Work with State Level Constants	W75I220A	System Setup (G75I2230), Retention Percentage	Search for the retention percentage and deferred period among the existing records by specifying the state code.
Add/Update State Level Constants	W75I220B	Click Add on the Work with State Level Constants form.	Set up the retention percentage and deferred period for a state.

Setting Up the Retention Percentage and Deferred Period

Access the Add/Update State Level Constants form.

State Code

Enter a user-defined code from UDC table 00/S to specify the state to which to apply the retention percentage. Examples are:

AP: Andhra Pradesh

KA: Karnataka

Retention Percentage%

Enter the retention percentage for the state during interstate stock transfers when VAT applies.

Deferred Period (In months)

Enter the deferred period (in months) for capital goods.

Entering Opening Stock Adjustment Amounts for VAT Credit

This section provides an overview of the opening stock adjustment and discusses how to enter the VAT credit carried forward.

Understanding Opening Stock Adjustments

Use the Opening Stock Adjustment program (P75I2136) to enter the VAT credit carried forward from the previous financial year for capital goods, personal consumption goods, and transferred stock. This setup application is optional. The amount that you enter in this application will show as the carry-forward amount in the current financial period.

Note. Enter the VAT credit before you enter VAT transactions.

Form Used to Enter Opening Stock Adjustment Amounts for VAT Credit

Form Name	FormID	Navigation	Usage
Fix/Inspect	W75I2136A	System Setup (G75I2230), Opening Stock Adjustment	Enter the opening stock adjustment amount for VAT credit.

Entering the Opening Stock Adjustment Amount for VAT credit

Access the Add/Update Stock Amount Adjustments form.

Year

Enter the year to which you are carrying forward the VAT credit from the previous financial year.

Amount for Capital Good

Enter the VAT credit carried from the previous financial year for capital goods.

Amount for Personal Consumption

Enter the VAT credit carried forward from the previous financial year for personal consumption goods.

Amount for Stock Transfer

Enter the VAT credit carried forward from the previous financial year for transferred stock.

Amount for Set Off

Enter the VAT offset amount.

Year	Enter the year to which you are carrying forward the VAT credit from the previous financial year.
Amount for Capital Good	Enter the VAT credit carried from the previous financial year for capital goods.
Amount for Personal Consumption	Enter the VAT credit carried forward from the previous financial year for personal consumption goods.
Amount for Stock Transfer	Enter the VAT credit carried forward from the previous financial year for transferred stock.
Amount for Set Off	Enter the VAT offset amount.